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Here's How Obamacare Is Going To Affect Your Taxes - Huffington Post

Google IRS Federal Income Tax - Tue, 2015-01-27 00:47

Chattanooga Times Free Press

Here's How Obamacare Is Going To Affect Your Taxes
Huffington Post
Taxes are a pain. Health insurance is a pain. This year, Americans will suffer both when they file their income taxes. Ouch. The Affordable Care Act, aka Obamacare, inserted health insurance into tax season in two ways, affecting nearly all of us. The ...
Don't be in a hurry to file: New tax form crucial for those who bought health ...Chattanooga Times Free Press
Feds to Taxpayers: Did You Get Health Insurance?

all 353 news articles »
Categories: Tax news

CBO: Budget Deficit Will Shrink before It Continues to Climb

Tax Foundation - Mon, 2015-01-26 13:45

The Congressional Budget Office (CBO) has released its 2015 to 2025 Budget and Economic Outlook. In this yearly publication, the CBO examines current laws (taxes and spending) and projects the outlook for the federal government’s budget for the next 10 years.

One of the topline projections the CBO makes is the budget deficit. This measures the difference between federal government spending and federal tax revenues (a higher deficit means the federal government is spending more than receives in tax revenue). The budget deficit has been in peoples’ minds for the past few years. The recession drove revenues down and lawmakers pushed through expensive stimulus spending bills, which combined to create massive budget deficits (the budget deficit was about $1.3 trillion in 2010). People were concerned about this, so many have been paying attention to the deficit’s year-to-year movements.

In recent years, as the recession has ended and as stimulus spending has wound down, the budget deficit has shrunk from its high. CBO’s latest numbers show that in the next two fiscal years (2015 and 2016), tax revenue growth will keep pace with spending growth. This means that the budget deficit will shrink slightly in fiscal year 2015 to 2.6 percent of GDP from 2.8 percent of GDP in fiscal year 2014. Between 2016 and 2018, it will remain about flat. A reasonably positive outlooks in the near term.

However, after the next couple years, the deficit will begin to climb again. From 2019 to 2025, the deficit will increase each year, except in 2023 and 2024 when it shrinks slightly. By 2025, the government will be back to $1 trillion budget deficits or a deficit of 4 percent of GDP. Certainly not the highest it has been the last couple of years, but it is “well above the average of 2.7 percent of GDP over the past 50 years,” according to the CBO.

The CBO also shows that the growing budget deficit is mainly driven by increased federal spending, rather than a shortage of tax revenues. From 2016 to 2025, tax revenues will remain around 18 percent of GDP. Meanwhile, spending will continue to increase as a share of GDP from a little under 21 percent of GDP in 2016 to 22.3 percent of GDP in 2025.

Over short periods of time, fluctuations in budget deficits aren’t all that meaningful and can be driven by cyclical movements in the economy. It is also hard to predict exactly what will happen in the future. However, the long-term trend towards larger year-to-year budget deficits projected by the CBO are slightly more alarming. Higher deficits means that the government will be tacking on more debt and could have trouble meeting its obligations in the future.

Categories: Tax news

South Carolina Governor Offers Tax Swap

Tax Foundation - Mon, 2015-01-26 12:30

Cut the individual income tax and raise the gas tax—that was South Carolina Governor Nikki Haley’s message in her 2015 State of the State address.

Though there aren’t a lot of details yet, it’s no surprise that South Carolina’s income tax rate is a competitive disadvantage for the state. South Carolina’s top rate of 7 percent is 12th highest in the nation, but also the highest among its immediate neighbors and surrounding regional states. Governor Haley was correct when she noted that “[South Carolina’s] 7% income tax rate stands out and puts [South Carolina] at a disadvantage.”

More specifically, Governor Haley prosed reducing the state’s top individual income tax rate from its current 7 percent to 5 percent over the next ten years. This would put South Carolina’s rate below both of its neighbors (North Carolina's flat rate currently sits at 5.75 percent and Georgia's top rate rings in at 6 percent).

A key feature of her plan, however, involves swapping a gasoline tax increase for an income tax reduction. That increased revenue from fuel taxes would go directly to road funding (though she explicitly noted that she’d only accept these as a packaged deal, in addition to changes to transportation funding administration).

As transportation funding continues to be an important issue for elected officials, it’s important to understand how roads are currently funded and how this system could be improved. As our colleague Joseph Henchman pointed out early last year,

The lion’s share of transportation funding should come from user fees (amounts a user pays directly for a service the user receives, such as tolls) and user taxes (amounts a user pays, based on usage, for transportation, such as fuel and motor vehicle license taxes). When road funding comes from a mix of tolls and gasoline taxes, the people that use the roads bear a sizeable portion of the cost. By contrast, funding transportation out of general revenue makes roads “free,” and consequently, overused or congested—often the precise problem transportation spending programs are meant to solve.

On average, user taxes and fees only fund just under half of road spending in the U.S., with the remainder coming from federal aid and state and local general revenues. (We include the following in “user taxes and fees”: fuel tax taxes, motor vehicle license taxes, and highway charges, such as tolls.) In the 2012 fiscal year (the most recent data available), South Carolina funded 50.7 percent of state and local road funding with user taxes and fees, as show in the chart below (click to enlarge). 

South Carolina’s gas tax is one of the lowest in the nation—amounting to only 16.75 cents per gallon. This is comprised of two separate pieces: a 16 cent excise tax and 0.75 cents in inspection and environmental fees

When the 16 cent base rate went into effect in 1989, it was actually above the average state gas tax of 13.4 cents (note that this is a weighted average). Twenty-six years later, the average state gas tax stands at 28.9 cents per gallon, while South Carolina’s remains far below that at its current 16.75 cents. Had the 1989 rate been indexed to inflation, the current rate would be 30.5 cents. In other words, inflation has eroded away almost half of the tax’s value since the last change.

Governor Haley’s tax swap proposal would take a step to correct this problem by increasing the gas tax by ten cents (to 26.75 cents per gallon) over a three year period. Once fully phased in, the new gas tax rate would be almost identical neighboring Georgia’s and nearly twelve cents lower than North Carolina’s (at their current rates).

According to state economic advisers, the income tax cut component would reduce revenue by $1.8 billion per year once fully phased in, while the gas tax would bring in an additional $340 million per year upon full phase-in. The overall plan would reduce state revenues by $9 billion over the first decade. Thus far, Governor Haley has proposed spending reductions with projected savings of $5.5 billion over the decade.

Other proposals are pending in the legislature, where the reception of the Governor’s plan was mixed, with some of the Governor’s Republican allies adopting a cautious tone. The Governor’s bold approach surprised many observers, who thought the gas tax off the table and didn’t expect such a substantial income tax cut proposal.

We will continue to follow the issue and provide updates as more information becomes available.

Follow Liz on Twitter @elizabeth_malm. Follow Jared on Twitter @JaredWalczak

More on South Carolina here. More on road funding here

Categories: Tax news

What The Heck Is A W-2? A Beginners' Guide To Filing Taxes In 2015

Yahoo Tax - Mon, 2015-01-26 02:46
The Internal Revenue Service has already said 2015 is going to be a crummy year for them – but that does not mean it has to be for you.
Categories: Tax news

IRS starts 2015 tax season, opens free file and e-file - Cape Gazette

Google IRS Federal Income Tax - Sun, 2015-01-25 08:16

Columbus Dispatch

IRS starts 2015 tax season, opens free file and e-file
Cape Gazette
Do not contact the IRS. IRS telephone assistors will not have access to this information. Taxpayers who benefited from advance payments of the premium tax credit must file a federal income tax return. These taxpayers need to reconcile those advance ...
Internal Revenue 'Service' just made it harder for some to pay their taxesNews Sentinel
An IRS giveaway: Tax-filing softwareMarketWatch
IRS to start 2015 tax season on timeDaily Herald
Freepress Online -Hawaii Army Weekly
all 84 news articles »
Categories: Tax news

Do You Need To File A Tax Return in 2015? - Daily Record

Google IRS Federal Income Tax - Sat, 2015-01-24 20:45

Daily Record

Do You Need To File A Tax Return in 2015?
Daily Record
Whether or not you are required to file a federal income tax return this year will depend on how much you earned (gross income) – and the source of that income – as well as your filing status and your age. Your gross income ... if age 65 or older). To ...

Categories: Tax news

An IRS giveaway: Tax-filing software - MarketWatch

Google IRS Federal Income Tax - Sat, 2015-01-24 20:13

Columbus Dispatch

An IRS giveaway: Tax-filing software
For example, about 70% of all taxpayers are eligible for free federal income-tax-preparation and electronic-filing software through a program known as "Free File." For the do-it-yourself crowd, Free File is definitely worth considering--as long as you ...
IRS Free File is now available to assist Hawaii tax filersHawaii Army Weekly
IRS limits 2014 tax documents to public librariesIsanti County News
IRS 'Free File' to help Californians with new health care lawThe Friday Flyer
News Sentinel -Daily Herald
all 84 news articles »
Categories: Tax news

IRS Giveaway: Tax-Filing Software - Wall Street Journal

Google IRS Federal Income Tax - Sat, 2015-01-24 18:09

Columbus Dispatch

IRS Giveaway: Tax-Filing Software
Wall Street Journal
For example, about 70% of all taxpayers are eligible for free federal income-tax-preparation and electronic-filing software through a program known as “Free File.” For the do-it-yourself crowd, Free File is definitely worth considering—as long as you ...
IRS starts 2015 tax season, opens free file and e-fileCape Gazette
Internal Revenue 'Service' just made it harder for some to pay their taxesNews Sentinel
IRS Free File is now available to assist Hawaii tax filersHawaii Army Weekly
Daily Herald -Freepress Online -Isanti County News
all 84 news articles »
Categories: Tax news

IRS Advice On Marijuana: Deduct It...But Prepare For 50% Tax - Forbes

Google IRS Federal Income Tax - Sat, 2015-01-24 17:03


IRS Advice On Marijuana: Deduct It...But Prepare For 50% Tax
As a result, even legal medical marijuana businesses have big federal income tax problems: tax evasion if they don't report, and a considerably smaller risk of criminal prosecution if they do. More imminent, though, is the risk of being bankrupted by ...

and more »
Categories: Tax news

5 convicted in tax fraud scheme - Pensacola News Journal

Google IRS Federal Income Tax - Sat, 2015-01-24 01:57

Pensacola News Journal

5 convicted in tax fraud scheme
Pensacola News Journal
The defendants perpetrated the scheme by falsely reporting to the IRS, using an IRS form, that defendants' or their clients' creditors had paid large amounts of interest, withheld equally large amounts of federal income taxes, and paid this money over ...

Categories: Tax news

U.S. Senate's Hatch sees support for tax reform

Yahoo Tax - Fri, 2015-01-23 13:17

By Kevin Drawbaugh WASHINGTON (Reuters) - The U.S. Senate's top tax law writer sounded determined on Friday about pursuing comprehensive tax reform, though this is viewed as unlikely by most analysts. "Though there are disagreements on the details, there is bipartisan support for tax reform in Congress," said Orrin Hatch, Republican chairman of the Senate Finance Committee, at a conference for tax lawyers, analysts and economists. Hatch took over leadership of the committee this month when Republicans gained control of the Senate. He said he expects to get recommendations from the groups "later this spring." The groups are looking at the individual income tax, business income tax, savings and investment, international tax and community development and infrastructure.

Categories: Tax news

The President Proposes a Second Tax on Estates

Tax Foundation - Fri, 2015-01-23 13:00

As part of his new tax plan, the president has proposed ending the “step-up” in tax basis for inherited assets, and, furthermore, requiring the capital gains tax to be paid at death rather than when an heir later sells the assets. There would be an exception for surviving spouses, with no tax due until the death of the second spouse, and an exemption for the first $200,000 of gains for a couple.

The step-up in basis has been libeled as some form of tax “loophole” for trust fund babies or the undeserving rich. These criticisms have generally been based on a misunderstanding of how estates are taxed, how the step-up works, why it exists, and how it affects the economy.

Eliminating Stepped-up Basis Would Create an Additional Tax on Estates

The step-up in basis is no loophole. The step-up is needed to prevent double or triple taxation of the same assets. Without it, the president’s plan could result in a 68 percent tax rate on capital gains upon death (the inheritance would be taxed at the 40 percent estate tax rate plus the proposed 28 percent tax rate on capital gains).

Ending step-up would be bad tax policy. It would surely harm capital formation and reduce wages and employment, and would ultimately lose revenue for the government.

Under current law, when assets are inherited, any gains built up during the decedent’s life are “forgiven,” and the heir’s cost basis in the asset is “stepped up” to the value of the asset as of the date the decedent died (or, alternatively, the date when the property was received by the heir). If the heirs sell the asset immediately, there would be no capital gains tax. If the heirs defer the sale of the asset, a capital gains tax would be paid when the asset is sold, but only the gain above the stepped-up basis since the inheritance.

Eliminating the “step-up in basis” for heirs when assets are inherited could trigger two taxes on the same assets: the estate tax on the total value of the assets, and the capital gains tax on any gains embedded in the value of the assets. The purpose of the current-law step-up is to prevent the assets in the estate from being subjected to both the estate tax and the capital gains tax. The estate tax rate (40 percent) is generally the higher rate. Estates subject to tax (those with assets over the $5,430,000 amount exempted by the unified estate and gift tax credit) pay the 40 percent tax on the excess over the exempt amount. If the step-up is eliminated, that portion of the estate would be hit twice. If the President’s proposal to raise the top capital gains tax rate to 28 percent were adopted, the top combined federal tax rate on the gains would be 68 percent.

To avoid the double tax, the taxed capital gain portion of the estate would have to be exempt from the estate tax, or a double tax would apply. The President’s plan does not appear to afford that protection. It excludes up to $200,000 in gains in the estate from the capital gains tax, but subjects all the gains to the estate tax. It seems to assume that people should have taken their gains while living and then paid the estate tax in full, as if deferring capital gains were a loophole in itself. [1]

Eliminating Stepped-Up Basis Would Create a New Estate Tax

Ending the step-up would also impose the capital gains tax on heirs of smaller estates that are currently exempt from tax. In effect, assets up to $5,430,000 that are now protected from the estate tax by the credit, and currently owing neither the estate tax nor the capital gains tax, would become subject to the capital gains tax or, a new estate tax. To avoid hitting these smaller estates, there would need to be a much larger exempt amount for the gains. If a $5 million estate contains $3 million in capital gains, the proposed $200,000 exemption is hardly giving the same protection as current law.

The president’s fact sheet dismisses this problem by saying that gains are a small share of most estates, and most would be protected by a $200,000 exclusion. But for estates with large gains, this would be a large problem. One could imagine two estates of the same size, one with small gains and one with large gains, paying two very different tax bills.

Eliminating step-up can lead to serious administrative and compliance issues if the heirs do not know the decedent’s cost basis of their portion of the estate. These concerns are a big reason why an earlier plan to end stepped-up basis, during the Carter Administration never went into effect.

Capital gains taxes depress capital formation by discouraging saving and raising the cost of plant and equipment. This new tax on inherited capital gains would raise money in the first few years by taxing existing assets, but over time, people would respond by saving less and creating less capital. That would eventually reduce GDP and total federal revenue from all sources due to the adverse effect on capital formation, wages, and employment. Long term, the provision would therefore provide no new revenue to pay for the middle income tax breaks the President is offering.

The Estate Tax Already Taxes a Dollar Multiple Times

There is a more fundamental issue that should be noted. The estate tax is always multiple taxation, even when capital gains are not present. Every penny in an estate has been, or will be, subject to the income tax. To tax the assets again with the estate tax is multiple taxation.

Ordinary Assets

Most assets in a typical estate were purchased with after-tax money, and are not in a tax–deferred retirement plan. The subsequent earnings of these ordinary savings were also subject to the income tax, as interest, dividends, or realized capital gains. In the case of corporate stock, the income was also taxed at the corporate level. These added layers of personal and corporate income taxes are double, or even triple taxation that applies to income that is saved (but not to income that is used for consumption).

Pensions and retirement arrangements were established to offset some of this tax bias against saving in favor of consumption under the ordinary income tax. The estate tax is yet another layer of tax applied to the savings, and can be a third or fourth hit on the same income.

Tax-Deferred Savings

Some assets in the estate may be in regular tax-deferred IRAs, 401(k)s, or other tax-deferred retirement plans, and have not yet been hit with the personal income tax. When an heir inherits these tax-deferred plans, he or she must begin withdrawing the funds and paying income taxes on them the next year. The heirs cannot continue the deferral of the tax.[2] Even tax-deferred retirement plans do not escape tax in the end.

The old saying is that nothing is more certain than death and taxes. In the case of the estate tax, this is literally true, regardless of what types of assets and accounts the decedent acquired. Step-up in basis is only a partial offset to several layers of tax that the savings in an estate have had to pay. Step-up should be retained as good tax policy and good policy for growth and job creation.

[1] Taxing capital gains as they accrue, instead of deferring them until the assets are sold, has long been the desire of the advocates of a “pure” Haig-Simons income tax. It would have a devastating effect on capital formation and wages.

[2] In a Roth IRA, the savings are built on contributions of after-tax money, and are therefore not subject to further taxation, including on any capital gains earned in the account. (However, the heir to an inherited Roth IRA must begin to make distributions from the account. These distributions are not taxed, but any future earnings on distributions kept as ordinary savings will be taxable.) The step-up in basis for small estates not otherwise subject to the estate tax provides a Roth-type exemption of the tax on the gain. It could be considered as giving additional Roth protection to people who never cashed out their savings, but instead left them at work creating jobs and higher wages for the rest of the country.


Categories: Tax news

Comprehensive Business Tax Reform a Good First Step

Tax Foundation - Fri, 2015-01-23 08:00

It looks like I wasn’t the only one unhappy with the president’s economic proposals in the State of the Union. In a New York Times op-ed this week, Glenn Hubbard, too, voiced his disappointment:

“Our unwillingness to confront mounting inefficiencies in the nation’s tax code and growing obligations in entitlement programs has led to increasingly limited options. Corporate tax reform is held hostage to the misguided idea that tax cuts and tax increases must be balanced within the corporate sector alone, and to the faulty assumption that beneficial tax reform will not raise economic activity.”

Hubbard, the former chair of President George W. Bush's council of economic advisors, mapped out a few pro-growth steps to help enhance economic growth – the first of which would do a lot to fix our broken tax code for businesses:

“The first [step] is to move to a simple business tax system, with a lower marginal tax rate and no special industry preferences. There would be no separate corporate tax, only a single business income tax for all businesses. Ideally, investment would be expensed, and its cost deducted in the year it was made, rather than deducted gradually. Businesses would be able to bring back overseas profits free of additional United States taxes. A one-time modest tax on current overseas earning could be used to help finance reform. Such a business income tax would encourage both growth and investment opportunities in the United States, while offering more jobs and higher wages to American workers.”

Hubbard’s proposal hits on many of the key points that a business tax reform should include: lowers rates for all businesses, full expensing of capital investment, and a territorial tax systems for our businesses that operate overseas.

Additionally, it’s important that Hubbard suggests that comprehensive reform should result in a tax system that treats all businesses the same. Pass-through businesses – which are taxed on individual tax return – make up about 95 percent of all U.S. businesses, earn over half of net business income, and employ a majority of private sector workers in the U.S. (See new report.) This makes it important that tax reform make both C corporations and pass-through businesses more competitive.

These changes are a great first step. This type of tax reform would boost economic growth and help U.S. businesses compete and grow at home and abroad 

Categories: Tax news

Britain announces new powers for Scotland, edges toward federalism

Yahoo Tax - Thu, 2015-01-22 08:22

By Andrew Osborn LONDON (Reuters) - The British government began a historic transfer of powers to Scotland on Thursday, keeping a pledge it had given to persuade Scots to reject independence as renewed nationalist support surges. Under the law, Scotland, which voted to reject full independence in a referendum in September, will be able to set income tax rates, have some influence over welfare spending, and be given the authority to decide how the Scottish parliament and other structures are elected and run. "The leaders of the other main political parties and I promised extensive new powers for the Scottish Parliament -- a vow -- with a clear process and a clear timetable," British Prime Minister David Cameron said in a speech in the Scottish capital Edinburgh. "And now, here we have it: new powers for Scotland, built to last, securing our united future." Cameron, whose party is deeply unpopular in Scotland, moved to quell nationalist doubts the draft law would reach the statute book, saying the new powers were "guaranteed" whoever formed the next British government.

Categories: Tax news

IRS rarely audits nonprofits for politicking

Yahoo Tax - Thu, 2015-01-22 03:00
New documents show the federal tax agency almost never audits nonprofit groups for illegal politicking.
Categories: Tax news

10 Surprising Items IRS Says To Report On Your Taxes

Yahoo Tax - Thu, 2015-01-22 01:49
Before you file your tax return, do you have unusual income items you need to report? Just about everything is taxable, including these strange items.
Categories: Tax news

Internal Revenue 'Service' just made it harder for some to pay their taxes - News Sentinel

Google IRS Federal Income Tax - Wed, 2015-01-21 22:04

Columbus Dispatch

Internal Revenue 'Service' just made it harder for some to pay their taxes
News Sentinel
Now, just three months before Americans must file their federal income tax returns, the Internal Revenue Service is drastically reducing the number of printed forms and instructional booklets it distributes through public libraries -- one of several ...
IRS starts 2015 tax season, opens free file and e-fileCape Gazette
An IRS giveaway: Tax-filing softwareMarketWatch
IRS limits 2014 tax documents to public librariesIsanti County News
Daily Herald -Freepress Online
all 84 news articles »
Categories: Tax news

Washington state attorney general seeks to raise smoking age to 21

Yahoo Tax - Wed, 2015-01-21 20:20

By Eric M. Johnson SEATTLE (Reuters) - Washington state could become the only U.S. state to raise its legal age for smoking tobacco to 21 from 18 under a measure proposed on Wednesday by its top law enforcement official. The legislation, if enacted, would also put the legal age for purchasing and possessing tobacco and nicotine-vapor products on an equal footing with the state's minimum drinking age of 21, with the goal of restricting access to teens and lowering healthcare expenses. The measure, however, would cost the state some $20 million a year in estimated tax revenue. ...

Categories: Tax news

New York's governor outlines $142 billion state budget, caps spending

Yahoo Tax - Wed, 2015-01-21 16:41

By T.G. Branfalt ALBANY, N.Y. (Reuters) - New York's Governor Andrew Cuomo announced a $142 billion state budget on Wednesday that keeps spending growth below 2 percent and promises more money for big-ticket infrastructure projects while cutting property taxes. The plan taps $5.4 billion in one-off settlements with banks to fund over $3 billion infrastructure and other investments and promises a $1.7 billion property-tax credit to 1.3 million home owners while essentially freezing spending at state agencies. "This is real, meaningful, significant tax relief that will make a difference in people's lives that will send a very strong signal that the New York we brought you for the last four years is the New York that we are going to continue," said Cuomo. The plan also held out the carrot of $1.1 billion increased education spending in return for reforms to the public education system that drew ire from union leaders and circumspection from some of Cuomo's fellow Democrats.

Categories: Tax news

Obama calls for simplifying tax filing for small businesses

Yahoo Tax - Tue, 2015-01-20 19:32
WASHINGTON (Reuters) - President Barack Obama called for tax reforms to help small businesses in his State of the Union address on Tuesday, saying simplifying their tax return filing process would help reduce their costs. "Let’s simplify the system and let a small business owner file based on her actual bank statement, instead of the number of accountants she can afford," Obama said. Obama also called on Tuesday for new bipartisan fast-track legislation to speed trade agreements through Congress. (Reporting by Sarah N. Lynch; Editing by Peter Cooney)
Categories: Tax news
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